Australia Monetary Policy December 2020

Australia

Australia: RBA stands pat in December meeting

December 1, 2020

At its monetary policy meeting on 1 December, the Reserve Bank of Australia (RBA) decided to keep the cash rate unchanged at the all-time low of 0.10%. It also left the target for three-year government bond yields at around 0.10%, and reaffirmed the size and extension of its bond-buying plans.

Recent data suggests that the recovery is ongoing following Q2’s crash, and recently announced vaccines could support the recovery ahead, although possible further outbreaks of the virus continue to pose downside risks. All said, the Bank still expects the recovery to be bumpy, which led it to maintain its extremely loose monetary policy stance to help the economy. This includes the purchase of government bonds in the secondary market, in order to lower financing costs and support credit supply.

The Bank maintained a dovish tone in its communiqué, stating that it expects to maintain the cash rate at its current all-time low for at least three years, until the labor market returns to full employment and inflation rises sustainably within the 2.0%–3.0% target range. Moreover, it added that the Board could further ramp up the bond purchase program or take additional action if necessary, to ensure the 0.10% target rate for three-year government bonds is achieved.

The next monetary policy meeting is scheduled for 2 February 2021.

FocusEconomics panelists forecast the cash rate to end 2021 at 0.10% and 2022 at 0.12%.


Author: Massimo Bassetti, Senior Economist

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Australia Monetary Policy Chart


Australia Monetary Policy December 20 20

Note: RBA Cash Rate in %.
Source: Reserve Bank of Australia (RBA).


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